assessing the validity of cev model in measuring ethical

15th International Conference on Business Management (ICBM 2018)

26

Assessing the Validity of CEV Model in Measuring Ethical Organizational

Culture in Banking Sector in Sri Lanka

Swarnajothi, S.,

University of Sri Jayewardenepura, Sri Lanka

[email protected]

Dissabandara, D.B.P.H.,


[email protected]

Senadheera, G.D.V.R.,


[email protected]

Cadbury (1992) refers corporate governance, as systems, structures and processes by which business corporations are

directed, controlled and monitored. The success or failure of the corporate governance will depend not only on legal

requirements but also on other ethical behavioural aspects and internal governance culture in the organization.There

should be an environment within the organization to have a culture and behaviour that will strengthen the implementation

of good corporate governance practices. A company should have specific principles and values related to their stakeholder

commitment. These values are more important than a rule based approach. Kaptein (2008) has developed the CEV model

which consists of eight virtues, namely; clarity, congruency of supervisor, congruency of management, feasibility,

supportability, transparency, discussability and sanctionability.

The purpose of this study is to assess the validity of CEV model of Kaptein in measuring ethical organizational culture in

a banking sector environment in Sri Lanka. A questionnaire was prepared based on the 58 scales of the CEV model and

distributed among 50 employees of a leading private bank in Sri Lanka and out of them 40 were responded. This analysis

is based on the data collected from those 40 participants. A five point Likert Scale ranging from (1) strongly disagree to

(5) strongly Agree was used. Cronbach’s Alpha coefficient Analysis was used in measuring the reliability, and KMO and

Bartlett’s tests were used to assess the convergent validity. CEV model has been found valid in measuring ethical

organization culture with few modifications to the scales in Sri Lankan banking environment. .Since this study has been

made as a pilot study using only 40 participants of a particular organization in the banking sector there are certain

limitations in this study. There is an opportunity for future researchers to use more data from different type of

organizations and compare them to generalize the findings.

Key Words: Corporate Governance, Ethical Organization Culture, CEV model


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INTRODUCTION

Cadbury (1992) refers Corporate Governance, as the systems, structures and processes by which

business corporations are directed, controlled and monitored. Main body of knowledge of

corporate governance is based on Agency relationship, (Jensen and Meckling1976;

ShleiferandVishny, 1997) Stewardship and stake holder relationship (Williamson, 1975; Freeman,

1984), etc. Although numerous laws and regulations are imposed by relevant authorities to

strengthen the Corporate Governance, still we are experienced with corporate scandals. In order to

find the answer for a robust corporate governance mechanism we have to think ahead of traditional

economist view and find out some ways and means beyond that thinking. It is evident that legal

frame work imposing the corporations to comply with certain requirements, alone will not be a

successful measure unless the corporations itself behave ethically from the top to the bottom of its

organization. There should be a proper implementation mechanism and environment within the

organization to have a culture and behaviour that will strengthen the implementation of good

corporate governance practice.

Ethical aspect of corporate governance has been emphasized by several academics and researchers

in this field. Cadbury suggests that corporate governance is a concept with implications for an

organization’s approach to corporate social responsibility and business ethics in addition to

ensuring that regulatory responsibilities are fulfilled. Hermalin (2005) stated that corporate

governance can be considered as a process that involves an environment of trust, ethics, and moral

values of all the stakeholders. According to Collier and Roberts (2001) corporate governance is

not just a function of finance or accounting. The success or failure of the corporate governance

will depend not only on legal requirements but also on other ethical behavioural aspects and

internal governance culture in the organization.

Ethical Organizational Culture (EOC)

Ethical organizational context, is represented by two constructs, i.e: ethical climate and ethical

culture (Trevino and Weaver, 2003; Kaptein, 2008).Ethical climate is perceptions and aspects that

determine what constitutes ethical conduct (Victor and Cullen, 1988), whereas ethical culture is

those aspects that stimulate ethical conduct (Trevino and Weaver, 2003; Kaptein, 2008). As

Rentsch (1990) described ethical culture is more concern about the organization and ethical climate

pays more attention to individual’s perceptions and feelings. In general, ethical culture

encompasses the experiences, presumptions, and expectations of how the organization is

preventing unethical behaviour and promoting ethicality (TrevinoandWeaver, 2003). It is therefore


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a subset of organizational culture,with formal (e.g. codes of ethics, reward systems) and informal

(e.g. peer behaviour, ethical norms) systems that can promote either ethical or unethical behaviour

(Trevino et al 1990) Ethical culture of an organization stimulates the positive behaviour and well-

being of its members (e.g. Trevino et al., 1998;Kaptein, 2010; Huhtala et al., 2011) The logic

behind the idea of focusing on ethical values as a means to impact employee ethical behaviour is

that individuals can be expected to act in a manner consistent with the values in the organization

(Hunt et al., 1989).

Trevino defined EOC as those aspects and conventions of organizational behaviour that either

encourage the organization to operate in a sustainable way or deter it from doing so. He has defined

EOC as “a subset of organizational culture, representing a multidimensional interplay among

various “formal” and “informal” systems of behavioural control” (Trevino et al., 1998). When

employees believe that policies and procedures regarding ethics are followed by managers and

other individuals in the organization then higher ethical values exist. Managers might display these

values by acting ethically themselves and by rewarding ethical behaviour and punishing unethical

behaviour (Hunt et al., 1989; Jones, 1991). Working to create an enhanced level of ethical values

can significantly impact the behaviour of individuals within the organization

Paine (1994) stated that the integrity approach to a firm’s thinking about business ethics and

corporate responsibility to be deeper and broader than that guided by compliance. A code of ethics

can be thought of as a set of moral principles or guidelines which govern behaviour and which

enshrine a set of values and beliefs. If employees observe that management are behaving in an

unethical manner, then staff ultimately end up following their lead. (Huhtala et, al (2013)

Ethical business cultures are "based on alignment between formal structures, processes, and

policies, consistent ethical behaviour of top leadership, and informal recognition of heroes, stories,

rituals, and language that inspire organizational members to behave in a manner consistent with

high ethical standards that have been set by executive leadership" (Ardichvili et al.(2009)Corporate

Ethical Values can also be displayed through more formal systems such as reward systems,

policies, and codes. When employees believe that policies and procedures regarding ethics are

followed by managers and other individuals in the organization then higher CEV exist. For

example, managers might display these values by being concerned with the issues of ethics in their

organization and by acting ethically themselves including rewarding ethical behaviour and

punishing unethical behaviour (Hunt et al., 1989; Jones, 1991)


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Ardichvili and Jondle (2009) defined Ethical Organization Culture (EOC) as a subset of

organizational culture, signifying a multidimensional interplay among several formal and informal

systems of behavior control that are capable of promoting ethical or unethical behaviour. There is

evidence to suggest that leaders’ ethical development is connected to organizational culture and

socialization processes (Brown and Trevino, 2006). A strong ethical culture promotes structures

and decision-making processes, which can support ethical choices in difficult leadership situations.

Corporate ethical values have been shown to have a positive impact on person-organization fit,

where, “individuals can feel more compatible with organizations that share their values when these

values are ethical”(Andrews et al., 2011)

Existence of an ethically-oriented organizational culture could influence on the ethical behaviour

of the members of the organization (Brien, 1998; Seligson and Choi, 2006; Sinclair, 1993; Smith

and Drudy, 2008).According to Trevino et al. (1998) there is a positive relationship between ethical

culture and ethical behaviour as well as ethical culture and organizational commitment. Kaptein

(2011) stated that the influence of the ethical culture of organizations on employee responses to

observed wrongdoing.

Huhtala et al. (2013) stated that ethical culture has a direct effect on the occupational well-being

of managers and different dimensions of the ethical culture influence different forms of

occupational well-being differently. There is an association between ethical leadership and ethical

organizational culture. Ethical leadership has been shown to predict many positive outcomes

Leadership is often mentioned as one of the most important elements of an organization’s ethical

culture (Trevino, 1990; Brown & Trevino, 2006). Leaders who are perceived as being able to create

and support an ethical culture in their organizations are those who represent, communicate, and

role model high ethical standards (Brown et al., 2005).

It is important to develop an ethical culture in an organization as it benefits individuals as well as

the organization. This can be done by establishing ethical codes, providing training, informing

clearly what kind of behaviour is acceptable, and establishing reward and punishment procedure

etc. (Huhtala et.al (2013) Managers can develop their organizations’ ethical culture by creating

reward systems, ethical codes and norms (Weaver et al., 1999; Trevino and Weaver, 2003). A

strong leader with a high level of cognitive moral development and who can influence employees

is, therefore, able to act towards promoting an ethical organizational culture (Trevino and Weaver,

2003)


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According to Brown (1992) organizational culture can be a powerful tool for improving

performance and the key to organizational development and effective leadership. It is therefore

important to assess the state of the organization’s ethical culture and its effect on the organization.

The informal elements of a cultural system include norms for behaviour that are consistent with

the ethical standards or the code of conduct, mission, and decision-making processes (Trevino &

Brown, 2004). Leadership is often mentioned as one of the most important elements of an

organization’s ethical culture. Leaders who are perceived as being able to create and support an

ethical culture in their organizations are those who represent, communicate, and role model high

ethical standards (Brown et al., 2005).According to Hausman and McPherson (1993) ethical

attitudes and behaviour play an important role in overcoming the potential market failure

problems.Hunt and Vasquez-Parraga (1993) discuss the role of ethical culture in aiding ethical

behaviour within the organization.

Kaptein (2008) approaches the ethical organizational culture through ethical virtues. He stated that

both individuals and organizations should have certain features, virtues, which enable morally right

behaviour for an organization to become ethical. Virtue ethics provides a theory for organizational

culture by defining what kind of behaviour is morally right and worth pursuing. The Corporate

Ethical Virtue (CEV) model developed by Kaptein (2008) described eight normative virtues which

would promote the ethical culture of an organization.

Conceptual Framework

Congruence of

Supervisors

Feasibility

Congruence of

Managers

Clarity

Transparency

Supportability

Sanctionability

Discussability

Ethical

Organization

Culture


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Dimensions of the Construct

A research made by Trevino and others (Trevino et al 1998) has found that there is a positive

relationship with ethical action and employee behaviour. These findings indicate the necessity to

measure the ethical dimension of an organization culture. Although there were constructs

developed for ethical climate, Trevino is the first one who developed and tested a construct for

ethical culture (Trevino 1998).They used fourteen items; six for sanction for ethical and unethical

conduct, three for role modelling of top management, three for implementation ethics code and

one for whether ethical behaviour is the norm.

According to Kaptein (2008), the ethicality or virtuousness of an organization can be determined

by the extent to which organizational culture stimulates them to act ethically and prevents them

from unethical behaviour. Kaptein developed the corporate ethical virtue model (CEV model)

which consists of eight virtues,

De Bode et al (2013)made an effort by developing a shortened version of the CEV model for use

in ethics-related studies. By examining the shortened scale’s validity and generalizability across

multiple organizations in a different culture in United States. One goal of his study was to

administer the CEV model to employees from multiple organizations to understand which facets

of ethical behaviour were common across organizations and to assess the consistency of

employees’ perceptions across numerous organizations using a shortened version of the CEV

model.

He demonstrated that an acceptable ethical organizational culture questionnaire comprised of 58

items could be shortened to 32 items. The shorter scale will allow diagnosticians to combine it

with other questionnaires to facilitate a more comprehensive diagnosis (i.e., including ethical

culture). Thus, the shorter length will likely make the instrument more attractive to practitioners

and researchers who might shy away from longer diagnostic scales requiring more of their

resources

Methodology

In our study we identify eight dimensions of ethical corporate culture based on the CEV model of

Kaptein(2008) and developed our hypothesis. I prefer Kaptein’s model rather than DeBode’s

model(2013) or Trevino’s model (1998) as Kaptein’s model covers a wider range compared to the

other two. Eight dimensions identified in an ethical corporate culture are (i) clarity (ii) congruence


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of Supervisor (iii) congruence of top management (iv) Feasibility (v) Supportability (vi)

Transparency (vii) Discussability (viii) Sanctionability

(i) Clarity refers to the extent to which an organization’s expectations are clear to its

employees that they behave in an ethical manner. When employees are left to their own

discretion and moral intuition without a clear guidance or proper organizational frame

of reference, the risk of unethical conduct is high.

(ii) Congruency of Supervisors reflects the extent to which employees’ immediate

supervisor models appropriate ethical behaviour. Behaviour of immediate supervisor

has a greater influence on ethical behaviour of subordinates.

(iii) Congruency of Management refers to the extent to which the Board of Directors and

senior management influence ethical workplace behaviour. Unethical conduct of

employees is motivated by the example set by manager or board member engaging in

unethical and prohibited conduct. This organizational virtue amounts to the moral

requirement that managers should visibly act in accordance with ethical expectations.

(iv) Feasibility refers to whether an organization creates working conditions that facilitate

enabling employees to comply with accepted norms. If employees have little or no

scope to realize their tasks and responsibilities, the risk of unethical conduct increases.

Unethical conduct occurs when employees are lack of sufficient time, resources,

information, and authority to fulfil their responsibilities.

(v) Supportability denotes the extent to which employees are motivated to behave in

accordance with their organization’s ethical standards. Demotivated and dissatisfied

staff is more likely to behave unethically. Employees who feel that they are not taken

seriously or are not treated fairly might try to balance the scales of justice by deliberately

causing damage to the organization.

(vi) Transparency focuses on whether employees know the consequences of unethical

behaviour and rewards for ethical behaviour Employees can only be held responsible

if they know the consequences of their actions. Employees who are hardly aware of the

nature or seriousness of the consequences of their conduct are deprived of the

opportunity to account for, modify or alter their conduct. This can lead to a situation

where employees only focus on the action without regard for its consequences.

(vii) Discussability concerns opportunities for employees to raise, discuss, and correct

ethical issues and moral dilemmas at work. Unethical conducts by employees are

caused by an organizational culture with a low level of discussability or debatability. In


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such a closed culture, criticism is neither encouraged nor accepted. People close their

ears and eyes to what they do not want to hear or see. If employees are expected to

report, their work environment should be a secure place where moral issues can be

raised without fear of being victimized.

(viii) Sanctionability refers to the likelihood of employees being punished for behaving

unethically and rewarded for behaving ethically. When managers fail to punish

employees for engaging in unethical behaviour, the employees will think that unethical

behaviour is acceptable or tolerable. Sanctions should be imposed not just for the sake

of the perpetrator and victim, but also for the benefit of onlookers.

Scales

Based on Kaptein’s model we used 58 scales and coded as follows:

Coding

Clarity (CL)

CL1: Clear instructions on conduct towards others in the organization

CL2: Clear instructions on obtaining proper authorization

CL3: Clear instructions on usage of company equipment.

CL4: Clear instructions on utilizing working hours.

CL5: Clear instruction on handling money and other financial assets.

CL6: Clear instructions on dealing with conflict of interest and side line activities.

CL7: Clear instructions on dealing with confidential information

CL8: Clear instructions on dealing with external persons and organizations

CL9: Clear instructions on dealing with environmental issues

CL10: Immediate environment provide clear instructions on conduct themselves

Congruence of Supervisor (CS)

CS1: Supervisor should set good example for ethical behaviour


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CS2: Clear communication of importance of ethics should be given by supervisor

CS3: Supervisor should never authorize unethical or illegal conduct to meet business goals

CS4: Supervisor should do what he says

CS5: Supervisor should fulfil his responsibilities

CS6: Supervisor should be honest and reliable

Congruence of Board and Management (CM)

CM1: Conduct of board and top management should reflect shared set of norms and values

CM2: Board and top management should set a good example on ethical behaviour

CM3: Board and top management should communicate importance of ethics clearly.

CM4: Board and top management should never authorize unethical or illegal conduct to meet

business goals

Feasibility

FC1: Employees should never be asked to do things that conflict with their conscience.

FC2: Employees should never be asked to sacrifice personal norms and values for the success of

the organization

FC3: Employees should be given sufficient time to carry out their task responsibly.

FC4: Employees should be given sufficient information to carry out their task responsibly

FC5: Employees should be given adequate resources to carry out their task responsibly

FC6: Employees should never be put under pressure to break the rules.

Supportability

SP1: Everyone in the immediate working environment should be totally committed to the norms

and value of the organization

SP2: There should be an atmosphere of mutual trust in the immediate working environment


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SP3: Everyone in the immediate working environment should have the best interest of the

organization in their heart.

SP4: There should be a mutual relationship of trust between employees and management in the

immediate working environment.

SP5: Everyone in the immediate working environment should take the norms and standards

seriously

SP6: Everyone in the immediate working environment should treat one another with respect.

Transparency (TR)

TR1: Manager should be able to find out if something not permitted is done.by someone

TR2: Colleague should be able to find out if something not permitted is done by someone.

TR3: Someone should be able to find out if something not permitted is done by Manager.

TR4.If someone criticize the others action should be taken for that criticism

TR5: In the immediate working environment, there should be an awareness of potential violations

and incidents

TR6: In the immediate working environment, there should be adequate checks to detect violations

and unethical conduct

TR7 There should be a way to be aware by the management of the type of incidents and unethical

conduct occurred in the immediate working environment

Discussability (DS)

DS1: Reports of unethical conduct should be handled with cautious in the immediate working

environment

DS2: Employees should be given an opportunity to express their opinion in the immediate working

environment

DS3: There should be an adequate scope for the employees to discuss unethical conduct in the

immediate working environment.


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DS4: Reports of unethical conduct should be taken seriously in the immediate working

environment

DS5: There should be an adequate scope for the employees to discuss moral dilemmas in the

immediate working environment

DS6: There should be an adequate scope for the employees to report unethical conduct in the


DS7: There should be an ample opportunity for the employees to discuss moral dilemmas in the


DS8: There should be a respectful manner in calling to account for the conduct of employees

DS9: There should be an adequate scope to correct unethical conduct in the immediate working

environment

DS10: There should be an opportunity to raise the matter elsewhere in the organization, if unethical

matter reported does not receive adequate attention by the immediate working environment

Sanctionability (SA)

SA1: Employees should be accountable for their action in their immediate working environment

SA2: Ethical conduct should be valued highly in the immediate working environment

SA3: Only people with integrity should be considered for promotion in the immediate working

environment

SA4: Managers should be disciplined if he behaves unethically, if necessary

SA5: The people that are successful should stick to the norms and standards of the organization.

SA6: Ethical conduct is rewarded in the immediate working environment

SA7: Employees should be disciplined if they behave unethically in the immediate working

environment

SA8: Those involved in unethical conduct should be disciplined regardless of their position , if it

is reported to the management.


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SA9: Employees with integrity should be given a greater chance to receive positive performance

appraisal than employees without integrity

Analysis and Results

A questionnaire was prepared based on the above scales and distributed among 50 employees of a

leading private bank and out of them 40 were responded. This analysis is done based on the data

collected from those 40 participants. A five point Lickert Scale ranging from (1) strongly disagree

to (5) strongly Agree was used. Churchill (1979) and Parasuraman (1988) suggest that the

validation of an instrument begins with Cronbach’s Alpha coefficient Analysis. Therefore I have

used the Cronbach’s Alpha coefficient Analysis in measuring the Reliability As given in the table

1 The Cronbach’s Alpha Value for the 58 items was .953. As the correlation of all the items are

above.3, there was no item to be deleted.

Table1 : Reliability Statistics

Cronbach's

Alpha

Cronbach's Alpha Based

on Standardized Items N of Items

.946 .953 58

As the next step we used the Varimax rotation method to identify whether there are any item highly

correlated to each other. The following table 2 depict that certain items are highly correlated to

each other as highlighted.


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Table 2 : Rotated Component Matrixa

Component

1 2 3 4 5 6 7 8 9 10 11 12 13 14

CL4 .843

CL3 .832

CL9 .798

CL7 .710

SA1 .686

TR6 .641 .471

CM4 .512

CL5 .508

SA6 .500

CS4 .843

CS5 .798

CS1 .777

CS6 .740

CS2 .729

DS3 .834

TR7 .817

DS2 .773

DS1 .642 .463

DS6 .640

DS8 .574

SP2 .782

SP3 .738

SP1 .723

SP5 .709

SP6 .701

SP4 .700

CM2 .716

DS4 .684

CM3 .653

SA8 .582


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CM1 .564

TR2 .933

TR1 .933

TR3 .908

DS9 .538 .642

FC3 .500

FC2 .819

SA3 .478 .587

SA5 .469 .585

SA9 .539 .566

SA4 .496

FC4 .797

FC1 .757

FC6 .643

FC5 .461 .535

CL6 .871

CL10 .840

CL1 .764

CL8 .525 .478

CS3 .736

CL2 .558

SA2 .510 .489

DS5 .487 .602

DS7 .496 .592

TR4 .862

TR5 .606

DS10 .833

SA7 .594 .635

Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 22 iterations.


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Using the Varimax rotation method 12 items as highlighted in the table 2, have been identified as

highly correlated to each other and these items have been deleted. They are

CL8,FS5,TR6,DS1,DS5,DS7,DS9,SA2,SA3,SA5,SA7,SA9.Although 12 indicators are deleted

there is no necessity to reduce the number of dimensions at this stage, as factor analysis itself has

given 14 components which is far more than 8 dimensions given in our construct.After eliminating

above 12 items reliability and validity were tested for eight factors.The reliability statistics of the

data set was ensured with a Cronbach’s Alpha value of more than.7,the reliability of the instrument

was ensured in terms of consistency. Next step was to examine whether the deletion of any items

could improve the Cronbach’s Alpha value.

When ensuring construct validity Exploratory Factor Analysis with Principal Component Analysis

should be carried out. To examine whether items in the scale measures the theoretical construct

(Ethical Organization Culture) convergent and discriminant validity have to be ensured. If an item

loads significantly <.7 on the factor, it is measuring the convergent validity is prevalent and if it

ensures that no other items are measured by the concept discriminant validity could be established.

Reliability and validity of each factor is as follows

Factor 1: Clarity

Table 3: Reliability Statistics

Cronbach's

Alpha



.845 .840 9


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Table 4: Item-Total Statistics

Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

CL1 35.80 13.856 .494 .550 .836

CL2 35.45 15.228 .397 .344 .844

CL3 35.75 12.397 .770 .681 .805

CL4 35.85 11.721 .804 .706 .799

CL5 35.58 13.071 .630 .541 .822

CL6 35.65 14.746 .407 .427 .843

CL7 35.50 14.513 .410 .435 .844

CL9 36.45 11.279 .689 .652 .818

CL10 35.58 14.815 .457 .384 .840

The Cronbach’s Alpha value for the 9 items included in factor 1 was .840. There was no item to

be deleted and the values in the column labelled corrected item correlation are above .3.All items

had strong loading on the construct, they were supposed to measure indicating unidimensionality

and construct validity.

Factor 2: Supervisor Congruence


Cronbach's

Alpha

Cronbach's Alpha Based on

Standardized Items N of Items

.890 .885 6


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Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

CS1 22.17 7.122 .817 .814 .855

CS2 22.23 7.051 .727 .768 .867

CS3 21.75 9.064 .360 .334 .912

CS4 22.38 6.087 .808 .702 .856

CS5 22.28 6.666 .765 .737 .861

CS6 22.08 6.789 .789 .767 .857

The Cronbach’s Alpha value for the 6 items included in factor 2 was .885. There was no item to

be deleted and the values in the column labelled corrected item correlation are above.3.All items

had strong loading on the construct, they were supposed to measure indicating unidimensionality

and construct validity

Factor 3: Manager Congruence


Cronbach's

Alpha



.818 .819 4


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Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

CM1 13.35 2.233 .720 .573 .731

CM2 13.13 2.420 .690 .548 .749

CM3 13.20 2.318 .709 .512 .738

CM4 12.98 2.692 .456 .223 .853

The Cronbach’s Alpha value for 4 items included in factor 3 was .819. There was no item to be

deleted and the values in the column labelled corrected item correlation are above.3. All items had

strong loading on the construct, they were supposed to measure indicating unidimensionality and

construct validity

Factor 4: Feasibility


Cronbach's

Alpha

Cronbach's Alpha

Based on Standardized

Items N of Items

.763 .783 5


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

FC1 14.70 11.497 .774 .621 .642

FC2 15.60 11.221 .434 .269 .780

FC3 15.28 13.384 .470 .307 .740

FC4 15.00 12.308 .630 .523 .690

FC6 14.63 13.163 .454 .389 .745


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deleted and the values in the column labelled corrected item correlation are above.3.All items had


construct validity

Factor 5: Supportability


Cronbach's

Alpha



.912 .913 6


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

SP1 19.48 13.640 .766 .633 .895

SP2 19.30 14.677 .747 .606 .897

SP3 19.70 13.856 .775 .749 .893

SP4 19.45 14.767 .736 .703 .899

SP5 19.48 14.307 .739 .592 .898

SP6 19.35 14.541 .770 .618 .894




construct validity


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Factor 6: Discussability


Cronbach's

Alpha



.765 .838 6


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

DS2 20.68 8.276 .586 .710 .717

DS3 20.80 7.651 .721 .834 .682

DS4 20.48 8.512 .554 .499 .726

DS6 20.78 7.615 .720 .645 .682

DS8 20.75 8.192 .693 .584 .700

DS10 21.78 7.615 .722 .637 .884




construct validity

Factor 7: Sanctionability


Cronbach's

Alpha



.742 .762 4


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Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

SA1 11.77 5.307 .607 .406 .665

SA4 11.93 5.558 .514 .322 .704

SA6 12.60 4.041 .528 .347 .707

SA8 12.30 4.164 .585 .418 .656




construct validity.

Factor 8: Transparency


Cronbach's

Alpha



.600 .638 6


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

TR1 18.90 7.015 .478 .828 .502

TR2 18.90 6.554 .572 .830 .459

TR3 19.02 6.589 .599 .756 .453

TR4 20.07 7.610 .211 .213 .610

TR5 19.40 8.041 .081 .181 .677

TR7 18.95 7.792 .234 .096 .595

Out of the 8 dimensions Cronbach Alpha of 7 dimensions are higher than .7 except in the case of

“Transparency” which gives a value of .6.Therefore we have to look at the factor values given in

the following table to eliminate the highest value. But in this case eliminating one value will not


47

give Cronbach value above.7, because the highest value given in the table is.677 (TR5.) Therefore

we have to eliminate two items to get a Cronbach value higher than.7. So we have to eliminate the

next higher loaded value also, that is .610 (TR4)


Scale Mean if

Item Deleted

Scale

Variance if

Item Deleted

Corrected

Item-Total

Correlation

Squared

Multiple

Correlation

Cronbach's

Alpha if Item

Deleted

TR1 18.90 7.015 .478 .828 .502

TR2 18.90 6.554 .572 .830 .459

TR3 19.02 6.589 .599 .756 .453

TR4 20.07 7.610 .211 .213 .610

TR5 19.40 8.041 .081 .181 .677

TR7 18.95 7.792 .234 .096 .595

After eliminating those two values we get a Cronbach Alpha higher than .7 as given in the

following table

Transparency

Since new Cronbach alpha is above.7 reliability (internal consistency) of all the dimensions are

assured.

Convergent Validity

This can be tested by using KMO and Bartlett’s Tests. If KMO is > .5 and Bartlett’s is < .05 we

can accept the validity. Let us look at the following table which gives test results.


Cronbach's

Alpha



.794 .802 4


48

Table 21: Convergent validity of each dimension

Dimension Kaiser-Meyer-

Olkin Measure

Bartlett's

Test of

Sphericity

Calrity

.775

.000

Suoervisor

Congruence

.679

000

Manager Congruence .775

000

Feasibility .745 .000

Supportability .850 .000

Transparency .751 .000

Discussability

.751

.000

Sanctionability .687 .000

As KMO of all dimensions are above.5 and Bartlett’s are less than .05 the validity is assured


49

Composite Reliability (CR)

The Composite Reliability indicates the reliability and internal consistency of a latent construct. A

value of CR>0.6 (Fornell & Larker,1981) is required in order to achieve composite reliability for

a construct. Now we can calculate the composite reliability for each dimension based on the factor

loading using the following formula

CR = (∑fl)²

(∑fl)²+∑me

Table 22: Composite Reliability of each dimension

Dimension (∑fl)² ∑me (∑fl)²+∑me CR

Calrity

35.2955 4.904 40.200 0.878

Suoervisor

Congruence

22.6766 2.089 24.765 0.916

Manager Congruence 10.3234 1.383 11.706 0.882

Feasibility 13.3079 2.279 15.586 0.854

Supportability 25.0801 1.819 26.899 0.932

Transparency 9.523 1.255 10.778 0.884

Discussability 19.4834 2.509 21.993 0.886

Sanctionability 9.3330 1.662 10.995 0.849

As CR of all the dimensions are greater than .7, Composite Reliability is assured.


50

Average Variance

The AverageVariance Extracted indicates the average percentage of variation explained by the

measuring items for a latent construct. AVE >0.5 (Fornell & Larker, 1981) is required for every

construct.

Average Variance Extraction (AVE) =

Table 23 : Average Variance of each dimension

.674 .806 . 808 .737 .834 .828 .762 .764

AVEs of all are greater than .5 except for clarity, therefore reliability could be assured.

∑(fl²)

∑(fl²)+∑me

Clarity Supervisor

Congruen

ce

Manage

ment

Congrue

nce

Feasibil

ity

Support

-ability

Transpa

-rency

Discuss

-ability

Sanction

-ability

∑(fl²) 4.0956 3.9114 2.6174 2.7215 4.1809 2.7449 3.4909 2.3379

∑(fl²)+∑me 9.000 6.000 4.000 5.000 6.000 4.000 6.000 4.000

AVE 0.455 0.651 0.654 0.544 0.696 0.686 0.581 0.584


51

Assessing Discriminant Validity

To assess discriminant validity, Pearson Correlation has been calculated for each dimension as

given in the above table and compare with the square root of AVE.As Pearson correlation values

for dimensions are lower than the square root of AVE of each dimension, Discriminant Validity is

assured

Table 24: Pearson Correlations

Clarity

Supervis

Congrue

Manage

Congrue

Feasi

bility

Suppor

tability

Transpa

rency

Discuss

ability

Sanction

ability

Clarity Pearson

Correlation

1 .196 .391* .243 .464** -.011 .230 .543**

supeCongrue Pearson

Correlation

.196 1 .548** .464** .451** .206 .500** .418**

ManageCongr

u

Pearson

Correlation

.391* .548** 1 .402* .440** .199 .596** .769**

Feasibility Pearson

Correlation

.243 .464** .402* 1 .394* .119 .359* .335*

Supportability Pearson

Correlation

.464** .451** .440** .394* 1 .228 .525** .435**

Transparency Pearson

Correlation

-.011 .206 .199 .119 .228 1 .462** .235

Discussability Pearson

Correlation

.230 .500** .596** .359* .525** .462** 1 .570**

Sanctionabilit

y

Pearson

Correlation

.543** .418** .769** .335* .435** .235 .570** 1


52

DISCUSSION AND CONCLUSION

The purpose of this study is to assess the validity of CEV model of Kaptein in measuring ethical

organization culture in banking sector in Sri Lanka. The CEV model is used to measure eight

virtues, namely; clarity, congruency of supervisors, congruency of management, feasibility,

supportability, transparency, discussability and sanctionability .Eight factors were tested using

data gathered in a leading bank in Sri Lanka. The result of the factorial analysis of the scales made

in this study was in line with the previous findings of Kaptein. The results of this study support the

validity and reliability of the eight factor CEV model of Kaptein, with some modifications to the

scales. In the tested environment the number of items has been reduced by 12 items as they are

highly correlated as highlighted in the table 2 and thereafter reduced by another 2 items as indicated

in table 19.

In analyzing the data in a banking environment in Sri Lanka, based on the factor loading in table

2, it has been identified congruence of supervisors, congruence of managers, discussability and

supportability as clearly separable and consistent constructs as given in Kaptein’s model. However,

in Feasibility construct two items have been grouped with transparency (FC3) and

sanctionabilty(FC2). Clarity has been split into two groups forming a new one (CL1, CL6, CL8,

CL10) separated from others. In analyzing the items in this new group, it can be seen that they are

mainly concerned with human behavior in interacting with people rather than dealing with physical

or monitoring aspects of a bank. While two items of Transparency have been scattered between

clarity (TR6) and discussability, (TR7) another two items (TR4, TR5) have been formed into a

new grouping. Three items of Sanctionabilty (SA1, SA6, and SA7) have been grouped with the

construct of Clarity. In considering the factors mentioned above, it is worthwhile to see the

possibility of having 10 factors instead of 8 factors as given in Kaptein’s model.

Since this study has been made as a pilot study using only 40 participants of a particular

organization in the banking sector there are certain limitations in this study. It may be worthwhile

to study a larger sample of data including data from state banks to obtain a more comprehensive

analysis in the entire banking sector. Further, there is an opportunity for future researchers to use

more data from different type of organizations from different industries and compare them to

generalize the findings


53

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